Category: Legal Contract Management
It was a beautiful afternoon in Boston as Chief Compliance Officers from the area convened to discuss the changing role of compliance at their financial services firms. The venue, Top of the Hub, is situated at the highest point in Boston – amazingly appropriate given the conversation quickly gravitated towards visibility and the difficulty of transforming ISDA Masters & CSA’s into data that can be more easily analyzed and operationalized.
Conversation was lively with several topics resonating with all participants. A significant theme of the conversation was around the changing role of compliance within the business. Compliance leaders are now asked to sit at the negotiation table with clients and have become a key member of the team. With the regulators playing a more resident role in corporations, compliance has become a more visible component of daily activities. There was a general theme that the integration of compliance into the business functions has also integrated the role of Chief Compliance Officer.
When speaking about ISDA Master Agreements, many felt that this was an area for ongoing automation and restructuring. Specifically, the harmonization of the ISDA-related data would reduce cost and risk for many firms. The advent of tools in this area is an opportunity for the teams to improve their process. The process of collecting the ISDA detail is very manual today. Once automated, however, this data would better enable companies to address questions regarding most favored nation clauses and other contract call outs.
The general consensus is that there are many regulations for the buy side firms to cover. It is easy for things to fall through the cracks as many companies cannot cover all regulations with a SME. The attendees discussed that the maturing of the processes was key to success, with several recommendations offered. Three of these suggestions included:
- lobby ISDA collectively to request more structure,
- designate key staff members to be SMEs in areas of greatest concern and,
- agree on a standard CSA
The attendees discussed how to best direct their limited resources, thus being a main concern. One recommendation was to provide incentives to the organization for meeting guidelines. A detailed conversation was held recommending teams to review the operations logs on a regular basis to spot check for any opportunities open for improvement.
Firms at the table had many different types of risk: fiduciary vs. deposit risk, while some companies were faced with both risks and answered to multiple regulatory bodies, that often had conflicting recommendation or reporting. Additionally, the impact of international regulation was discussed as an area of rapid change that is also causing workload on these teams.
Overall, there seemed to be consensus about ways to improve:
- Implement a central repository for all important agreements
- Capture key contract terms related to risk and compliance
- Provide proactive visibility for business users that quantify the indicators they find most valuable
The event ended strong with many of the participants exchanging cards and committing to continued sharing of best practices. Many thanks to the participants for such a lively discussion and to Exari for hosting an amazing event!
I spent this week with our talented team in London and talking with leaders in both financial services and insurance. We’ve recently delivered a new Contract Model that enables companies to more effectively manage risk. Most of the leaders I spoke with expressed deep concerns about the risk embedded in their contracts- one top ten bank said “we have all the data, we just don’t know if it’s the right data”.
It’s a huge problem with contracts because so much of the data is interpreted. A limitations of liability clause might be 3 paragraphs in one contract and 1 in another and say the same thing. In order for the data to be used properly, it has to be interpreted and stored as data so it can be analyzed, correlated and used for decision making?
Why is this so hard? One customer outlined their contract management nightmare when they tried to use a document management, workflow, master data management and data warehouse to extract and report on contract data. Just keeping the systems in sync was a nightmare. After 3 years and $25m USD, they abandoned the project. What they have now is a very expensive electronic filing cabinet.
Contract “data” doesn’t really exist until it is interpreted and normalized; our Universal Contract Model (UCM) does that for companies and shows them a 360 degree view of their contracts. It’s real and it works. Now contract data can be valuable in managing risk across the enterprise.
“You’re wanted upstairs. Now. As in, immediately.”
There’s nothing quite like these words to kick off a relaxing day at the office. You head up to the executive suite wondering what fire-drill, or firing offense, awaits.
As you walk in, the Wall Street Journal flies across the room and lands at your feet.
“Our biggest back office vendor has been hacked. It’s a disaster. Apparently it happened a week ago. So why am I finding out about this in the Journal? What’s our legal position?”
You pause. You think. Where is the contract? Did I negotiate that one? Was there an obligation on them to report incidents like this as soon as they occurred? What’s our obligation to notify affected customers? How much time have we got? What if the vendor goes under? Can we terminate and switch vendors? Or was this exclusive? Can they hide behind capped liability?
So many questions. So little time. So many angry executives.
What happens next depends in large part on how well you stress-tested your contracts before an event like this. If you planned ahead and created a trusted source of operational contract data, you can probably answer many of these questions quickly and with confidence. If you did nothing to prepare, you will likely spend the day (or the week) running around like a headless chicken, looking for contracts, scrambling through paperwork, and wondering how to say “I don’t know” without sounding like an idiot.
And this is just one stressful event.
There can and will be many others: corruption scandal, currency crisis, regulatory investigation, product recall, patent litigation, credit crunch, and more.
But don’t stress out. Stress test. Get ahead of the problem. If you stress test ahead of time, you can fix the weak links. If you wait for a crisis, it’s too late.
Join us for a free webinar on Thursday, October 29th at 11am EDT to find out how to best prepare for a crisis and protect your company and your job. Click here to register or to learn more.
Jamie Wodetzki is Exari’s Co- Founder & Chief Product Officer. Reach out in the comments or @wodetzki
In our last post we began a discussion about the relationship between legal technology and the perceived threat it poses to lawyers’ job security. We noted that claims abound warning of technological advances that will all but supplant lawyers and – gasp! – even law firms.
So what’s wrong with this notion of “robot lawyers”?
To oversimplify, the law is a human thing. Technology is a great enabler, allowing humans to focus less on the necessary cumbrous bookkeeping, administrative and practical tasks, and more on the law.
Laws regulate people (and, lest we forget, the corporate ‘person’), and are written, interpreted and enforced by people. No matter how regimented and rote, the law and its application contain degrees of reason – human reason – that algorithm cannot account for. These limitations become even more pronounced as complexity increases. And whenever reason comes into play, technology can only support – but not supplant – flesh and bone legal professionals. The real question, then, is what aspects of the law depend on human reason? Turns out, almost all.
Let’s set aside the obviously humanity-centric areas such as Constitutional and Family Law, and go straight to the heart of the beast: contract law. Technology can – and does – play an increasingly important role in contract law by enabling streamlined contract creation, tidier negotiation, intricate contract data-based reporting, and overall visibility into the lifecycle of a contract. But, in contract law as elsewhere, technology is only as useful as its use by lawyers is consistent and deliberate. Plus – and this goes without saying – it takes skilled people to create the rules, logic, and enter the data that make the software run and keep it running.
We’ve been talking a lot about the rise of legal technology and how it will help corporate lawyers – and the businesses they work for – in exciting, invaluable ways. In this, the first in a two-part series, we’ll briefly explore the rhetoric surrounding the relationship between legal technology and the longevity of the legal profession.
While there are new and evolving technologies affecting all areas of law, we’ll mostly be talking about contracts because they represent tangible and meaningful outputs throughout the law. And because, frankly, they’re what we know best.
Advancements to the profession provided by legal technology have proved nothing less than thrilling (for us, anyway). As the practice of law has become increasingly bogged down in regulation, paperwork and mountains and mountains of documents, technology eases the pain of dealing with what could otherwise become convolution. In the contract world, for example, automation and lifecycle management saves lawyers significant time otherwise spent on low-level tasks, from digging through filing cabinets to drafting standard contracts. As technology becomes better at completing rule-based jobs such as easing document creation, collaboration, sharing, storage and analysis; compiling clauses in searchable libraries; setting notifications for renewal and expiry; flagging high-risk/non-standard clauses; cleaning up and recording changes made in negotiations; and accumulating and reporting on data, lawyers have more time and wherewithal to dedicate to engaging legal work. In the realm of civil litigation, e-discovery software effectively automates what were once hugely expensive, drawn-out manual discovery processes, leading to significantly reduced costs. In general, by reducing time spent (dare we say wasted?) on value-poor tasks, technology can and will lower the overall cost of access to legal experts.
The legal profession is steeped in tradition and history. In fact, the law itself tends to respond to contemporary problems by looking back, and legal professionals are no different. If we should believe stereotype – and many firsthand accounts – lawyers tend to resist change tooth and nail. After all, they were bred – and are handsomely remunerated – in an age-old institution that lauds ethics and intellect, not innovation and reinvention.
A recent Law Practice Magazine article, Why Do Law Firms Resist Innovation? 10 Reasons, observes, “What passes for a radical change in a law practice—a new training program, some alternative billing, an extranet—is old hat in other markets.” As a profession that sticks to the beaten path, with a generation of young lawyers that has come to expect a few years of filing, drafting and proofing before they begin to tackle stimulating legal challenges, it is no wonder so many legal teams are hesitant to embrace legal technology.
We have just read a very interesting post on LawSites by Robert Ambrogi that provides his thoughts on the 10 most important legal technology developments of 2013. At Exari, we’ve experienced many of these trends firsthand by working closely with dozens of leading companies on their document assembly and contract management challenges.
Neuroplasticity is a relatively new term that describes the way our brains are capable of continually adapting and changing in ways that are both surprising and amazing. It turns out that we form new neural connections throughout our lives in response to new situations or changes in our environment.
Can machines out-think humans, today or maybe someday? And what impact could this eventuality have on professions such as the law? Will computers replace the lawyers and contract managers who currently create, negotiate, analyze and track contracts? Or does the complexity of these tasks require a mysterious human touch?
In a recent New York Times Sunday book review, Walter Isaacson, the biographer of Steve Jobs and Albert Einstein, reviews “Smarter Than You Think”, a book by technology journalist Clive Thompson. If Thompson is right, the future may not favor man or machine. Rather, we’ll see a hybrid model emerge: the best of human and machine intelligence working together. Perhaps, we should call it the Prius Effect?
It’s hard enough to get lawyers to agree about things happening right now. Getting them to agree about the future? That’s impossible. So it’s no surprise that there were many different views of the future at Stanford’s FutureLaw Conference. The event, hosted by the “CodeX” Center for Legal Informatics, brought together a broad mix of legal, technology, business, academic and finance people for a busy day of future-gazing. What follows is my personal take on the conference highlights and some impressions on where there was (or wasn’t) consensus. For another perspective, you can read Tim Hwang’s take on the “Stanford Consensus” here.